Canada dollar rises as U.S. jobs report fuels Fed stimulus bets

The Canadian dollar traded at almost the strongest level this month against its U.S. counterpart on speculation weaker-than-forecast U.S. jobs gains last month will lead the Federal Reserve to maintain its monetary stimulus.

The currency strengthened (FOREX:CADUSD) as Canada’s retail sales rose for a second month in August, matching a record set three months earlier, on gains in food and clothing. The Bank of Canada will release a rate decision along with its monetary policy report Oct. 23. Senior Deputy Governor Tiff Macklem said earlier this month that the nation’s economy will expand more slowly than had been forecast.

“The Canadian dollar is outperforming the U.S dollar because such a negative report for jobs in the U.S. means expectations for tapering have been extended a little bit more, which means the U.S. dollar should feel a little bit more pressure against everything, including the Canadian dollar,” said Greg T. Moore, a currency strategist at Toronto-Dominion Bank, by phone from Toronto. “It’s a lower-yielding currency than the Aussie or Kiwi and so not going to move as much as those on tapering expectations.”

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.2% to C$1.0287 per U.S. dollar at 9:07 a.m. in Toronto. It reached C$1.0277 on Oct. 18, the strongest level since Sept. 30. One loonie buys 97.21 U.S. cents.

The U.S. addition of 148,000 workers followed a revised 193,000 rise in August that was larger than initially estimated, Labor Department figures showed today in Washington. The median forecast of 93 economists surveyed by Bloomberg called for a 180,000 advance. Unemployment fell to 7.2%, the lowest level since November 2008. The report, delayed by the 16-day shutdown that ended Oct. 17, was originally slated for Oct. 4.

The U.S. central bank will delay the first cut to its stimulus program until March, according to the median estimate of 40 economists in an Oct. 17-18 Bloomberg News survey. A previous survey had the Fed tapering purchases in December.